Bankruptcy is a lawful course of action which allows individuals who are unable to reimburse their debt a new beginning. A choice to file for bankruptcy is a decisive step. Debtors should consider all their financial alternatives before they file in for bankruptcy. It is not a small step and it has very strong and lasting consequences. One of the major drawbacks is that it remains in the debtor's credit file for ten years, creating a negative impact for the many years, even after the debt has been dealt with.
It is wise to consider debt consultants. There are many non-profit credit counseling agencies out there and they can work out a debt repayment program depending upon the debt amount and the debtor's income level.
People who do not choose to file for a bankruptcy should hire a good lawyer who is knowledgeable about the new changes brought in by the new federal law signed by President Bush, which makes it more difficult to file for bankruptcy.
Basically, there are two types of bankruptcy accessible to the majority of people. Chapter 13 permits the debtors to still own their property that could otherwise be taken away as a form of payment from the debtor. This type of bankruptcy is called a reorganization that allows the debtors to pay off or deal with a non-payment over a time, usually three to five years, rather than give up their property.
The second type of bankruptcy is the Chapter 7, which can be filed every six years. It may be preferred to straight bankruptcy that necessitates liquidation of every possession that is not exempt in the debtor's state. Items such as work-related tools and basic household furnishings usually fall under the exempt property, but some property may be sold by a court-appointed official or turned over to creditors.
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